Financial Management

A rights issue and bonus issue offer new shares to existing shareholders. Companies aim to handle their cash problems using these two methods. However, both of these options offer different benefits and limitations to the issuing companies as well as their shareholders. Let us discuss what is a rights issue, a bonus issue, and their […]

The most common reason for issuing scrip dividends is to keep the cash reserves. However, companies also have other valid reasons to issue scrip dividends instead of cash dividends. Let us discuss what are scrip dividends and why do companies issue them. What is a Scrip Dividend? A scrip dividend is paid in the form

Days payable outstanding (DPO) are the days taken by a company to clear its accounts payable. It also indicates how long a company takes to convert its raw material into finished goods and utilize that cash to pay its creditors. Several factors affect the DPO figure. A company can have a high or a low

The lock-up period is the timeframe during which insider traders, corporate investors, and company employees cannot sell their shares. Companies can use the lock-up period for several purposes including share price stability, employee retention, fraud prevention, and publicity. Let us discuss what is the lock-up period, how it works, and what purposes does it serve

What is meant by Cost of Capital? Cost of Capital can be defined as the company’s calculation of the minimum amount of return that is required that would be necessary in order for a process to be considered acceptable. The concept of cost of capital is mostly used when undertaking, or further justifying a capital

Definition of WACC Weighted Average Cost of Capital is defined as the company’s cost of capital that is calculated using debt and equity. It can be defined as the minimum required rate of return for the company before the organization makes any new investment. It encapsulates the average cost of capital that the company obtains

Bear call spreads, or bear call credit spreads, are options strategies employed by options traders who expect the underlying assets price to decline in the future. So, it’s a bearish approach because the expectation is about a decrease in the price for underlying assets. Further, it’s a credit spread because the net premium received is

Bull put spread is an options strategy; it’s suitable for the traders that want to limit their loss. However, it comes with restricted profitability. In this article, we shall discuss detailed characteristics of the strategy, including opening the position. An investor uses a bull put spread when they believe the underlying asset will rise moderately

Credit spreads and debit spreads are the strategies to trade-in options. In the title context, the spread is a difference between receipt and payment of the premium on writing/purchasing options. So, if the receipt is higher than payment on exchange of options, it’s called credit spread. On the other hand, if payment is higher than

Options are a derivate instrument, and their value is dependent on the underlying assets. It’s used to realize speculation on the movement of an underlying asset.  If the price of the underlying asset moves in expectation of the buyer of the options, it generates a financial return for them. The other side movement can lead